Hospitality Industry Spotlight - Underpayment

Hospitality Industry Spotlight - Underpayment

Underpayment of wages refers to the situation where the employer fails to pay the minimum monetary amounts including wages, allowances or penalty rates prescribed by the applicable instrument.

Underpayments can have significant consequences. For employees it means living on an unfairly low wage. For employers it can mean serious penalties – both monetary and reputation damage to the business.

Most underpayments happen because a mistake has been made. Fixing it quickly, and getting it right in the future, is important. If you noticed the underpayment yourself, make sure you call our Workplace Advice Line (1300 575 394) so we can guide you through the process.

Workplace Assured has compiled a selection of underpayment cases from Australia for your review below:

The Fair Work Ombudsman has commenced legal action against a PappaRich restaurant operator, alleging he was involved in underpaying 154 workers $74,000 across three PappaRich outlets in Sydney.

Facing the Federal Circuit Court is Loke Cheng Wong, manager-operator of the PappaRich franchise outlet at Macquarie Park, and former manager-operator of PappaRich franchise outlets in Chatswood and on Liverpool Street in the Sydney CBD.

The FWO is also taking action against two companies Mr Wong is a director and part-owner of, PPR Ryde (NSW) Pty Ltd and Gateharvest Pty Ltd, for alleged involvement in some of the underpayments.

Fair Work Ombudsman Sandra Parker said that inspectors discovered the underpayments when they scrutinised the businesses during proactive audits.

“Enforcing compliance with workplace laws in the fast food, restaurant and catering sector continues to be a priority for the Fair Work Ombudsman. Franchise outlets are on notice that they must pay all employees according to Australia’s lawful minimum pay rates,” Ms Parker said.

Between 29 May and 2 July 2017, PappaRich employees were allegedly paid flat rates as low as $13 to $14.50 per hour, which resulted in underpayment of the ordinary hourly rates, penalty rates, overtime rates and casual loadings under the Restaurant Industry Award 2010.

In total, it is alleged that 73 employees who primarily worked at PappaRich Macquarie Park were underpaid $34,834, a further 42 employees at PappaRich Chatswood were underpaid $22,533, and 39 employees at the PappaRich Sydney CBD outlet were underpaid $16,633. Some of the employees worked at more than one of the three stores.

Ms Parker highlighted that a number of the affected PappaRich employees were migrant workers on student and working holiday visas.

“All workers in Australia have the same rights, regardless of citizenship or visa status, and we encourage anyone with concerns about their pay to contact the Fair Work Ombudsman. We have an agreement with the Department of Home Affairs where visa holders can seek our help without fear of their visa being cancelled,” Ms Parker said.

The FWO further alleges that across the three stores, laws relating to annual and personal leave entitlements, entering into written agreements with part-time employees, minimum engagement pay, a split shift allowance, record-keeping and pay slips were breached by Mr Wong and his companies.

Mr Wong faces penalties of up to $12,600 per contravention and the maximum penalty for PPR Ryde (NSW) Pty Ltd and Gateharvest Pty Ltd is up to $63,000 per contravention.

The operator of an Indian restaurant in Sydney is facing Court for allegedly breaching a Fair Work Commission order by failing to pay compensation to a visa holder it unfairly dismissed.

The Fair Work Ombudsman has commenced legal action against Dharma Reddy Gummi and his company, Indian Food Catering Pty Ltd, in the Federal Circuit Court.

Last year the Fair Work Commission found the company had unfairly dismissed a cook at its Amritsari Dhaba restaurant in Doonside, in western Sydney. The cook, who commenced employment with the company in 2016, was dismissed by email effective immediately in March last year.

The sacked worker was an Indian national who had been on a skilled 457 visa and was on a bridging visa at the time of his dismissal.

The Fair Work Commission ordered the company to pay $18,000 minus tax in compensation to the former employee, through six instalments due on set dates each month between September 2018 and February this year.

The company has allegedly paid only $3,750 in total.

Fair Work Ombudsman Sandra Parker said the legal action would reinforce the importance of the Commission’s orders.

“It is fundamental for the integrity of the workplace relations system that orders are complied with, and we will take legal action to ensure employees receive compensation,” Ms Parker said.

The Fair Work Ombudsman alleges the company and Mr Gummi have breached the Fair Work Act by failing to comply with the Fair Work Commission order and seek penalties against each.

The company faces penalties of up to $63,000, and Mr Gummi of up to $12,600.

The Fair Work Ombudsman is also seeking a court order for the company and Mr Gummi to pay the outstanding compensation amount owed to the employee, plus interest, and an order for legal costs.

Ms Parker said the Fast Food, Restaurants and Café sector was a priority for the agency, accounting for more completed disputes than any other sector in the last five financial years. In 2017-18, one-third of legal actions commenced by the Fair Work Ombudsman involved businesses in the sector.

“We expect employers operating a restaurant, café or fast food outlet to comply with workplace laws and orders, and will continue to take legal action where that does not occur,” Ms Parker said.

Melbourne Chinese restaurant faces Court

26 March 2019

The Fair Work Ombudsman (FWO) has commenced legal action against the former operator of a Melbourne restaurant, alleging it underpaid a migrant employee almost $70,000 and provided false records to inspectors during the investigation.

The FWO is also taking action against the company’s sole director Siak Kong Chi and bookkeeper Ying Lee, of the ‘China Bar Group’, alleging they were involved in some of the company’s alleged breaches of workplace laws.

It is alleged that China Bar Buffet (Epping) Pty Ltd underpaid a Chinese worker, who was in Australia on a spousal visa, $69,321 between February 2015 and December 2016.

Fair Work Ombudsman Sandra Parker said that improving workplace compliance in the fast food, restaurant and catering sector is a priority for the Fair Work Ombudsman.

“The Fair Work Ombudsman considers all allegations of worker exploitation seriously, particularly matters involving visa holders who may be reluctant to complain. The alleged significant underpayment of a migrant worker and falsification of records in this matter warranted Court action,” Ms Parker said.

“All workers in Australia have the same rights at work, regardless of citizenship or visa status, and we urge any migrant workers with concerns to contact us. We have an agreement with the Department of Home Affairs where visa holders can ask for our help without fear of their visa being cancelled,” Ms Parker said.

Inspectors commenced an investigation after the employee contacted the FWO. It is alleged they found the worker had regularly worked 60 hours per week as a kitchen hand at the China Bar Signature restaurant, but had been paid between only $700 and $1060 per week.

This allegedly resulted in underpayment of the ordinary hourly rates, overtime rates, and weekend and public holiday rates the employee was entitled to under the Restaurant Industry Award 2010. Annual leave entitlements, superannuation and a split shift allowance were allegedly also underpaid.

The FWO also alleges that China Bar Buffet (Epping) Pty Ltd provided inspectors with false records showing inaccurate hours of work and payments for the worker and other employees at the China Bar Express fast food outlet.

China Bar Buffet (Epping) Pty Ltd faces penalties of up to $63,000 per contravention and the maximum penalty for Mr Chi and Ms Lee is up to $12,600 per contravention.

It is alleged that part of the underpayment is still outstanding. The FWO is seeking Court orders requiring that outstanding back-payments and superannuation are paid, and that the company commission an external audit of compliance with workplace laws and rectify any further non-compliance issues discovered.

A directions hearing is listed in the Federal Circuit Court in Melbourne on 7 May 2019.

Employers and employees can visit www.fairwork.gov.au or call the Fair Work Infoline on 13 13 94 for free advice and assistance about their rights and obligations in the workplace. A free interpreter service is available on 13 14 50.

Information for the fast food, restaurant and café sector is available at www.fairwork.gov.au/frac.

Note: Since the alleged underpayment contraventions, the company licensed out the operation of China Bar Signature to an unrelated entity. The Fair Work Ombudsman makes no allegations against the current operators of the China Bar Signature restaurant.

The Fair Work Ombudsman also makes no allegations against the unrelated entity that operated China Bar Signature for the period 19 September 2016 to 16 October 2016.

A company and its director have been ordered to pay more than $250,000 in penalties for underpaying café staff a total of $73,000.

The Fair Work Ombudsman (FWO) has successfully taken action against Ital One Holdings and director Len Di Pietro in the Federal Circuit Court.

The company underpaid 54 workers a combined total of $73,347 at its 24 hour Café Baci in Mebourne’s Crown Casino precinct between 2015 and 2016. The company paid flat rates which undercut entitlements including the minimum rates for ordinary hours, overtime rates, casual loadings, and penalty rates for weekend, public holiday, late night and early morning work employees were owed under the Restaurant Industry Award 2010.
Company showed ‘no remorse’

According to Fair Work Ombudsman Sandra Parker, the FWO had previously put Mr Di Pietro on notice regarding paying the minimum wage and penalties.

Prior to this matter, three former Café Baci workers took their own actions in the small claims division of the Federal Circuit Court, which resulted in Ital One Holdings being ordered to back-pay the three workers a total of more than $32,000 in 2014 and 2015.

Affected employees included 24 visa holders who were mainly students from countries including France, Italy and India. The largest individual underpayment was $5433 for a food and beverage attendant between June and September 2016.

According to Judge Heather Riley, the respondents have shown no remorse.

“The [company] had been found by this court to have broken workplace laws in substantially similar ways on three previous occasions in the recent past," Judge Riley said.

“In my view, the need for general deterrence is a significant factor in this matter, given the level of disputes in the café and restaurant sector, and the vulnerability of many of the employees in that industry”.